The French elections turned out to be much to do about nothing. We saw the market completely ignore the news of Macron’s victory. More importantly, the NASDAQ notched another all-time high as AAPL continues to set new all-time highs. Volume was nearly twice its 50 day average volume. With the April jobs report and Fed meeting behind us what will the market be worried about next? Trust us we are sure there will be something. However, we are not about to enter into the debate. We care only about how our stocks react in this market and could care less as to why. Our end-of-day longs continue to work well and we continue to exit as needed. The overall market continues to act as if it wants to continue to support higher prices. While we are definitely not seeing huge movers we are still finding opportunities to extract gains from this market.
Odds still favor another rate hike of 25 basis points at the next Federal Reserve meeting. We are 5 weeks away, but the market is certain the central bank will raise interest rates again. Bonds sold off today as the 10 year Treasury note’s yield ended the day at 2.38%. Buffett was heard saying Bonds were a terrible investment. We tend to agree with him, but we are a stock market junkies and our bias is towards the stock market. Bonds serve their needs, but this isn’t the early 80s where bond yields were outrageous. The Federal Reserve has done its job suppressing yields and pushing people back into stocks.
The VIX closed in the single digits for the first time since the mid-2000s. Crazy to think we have seen such little fear in this market. Bears are always out in full force predicting the imminent demise of the stock market. They could very well be right, but the market continues to defy their odds. We are sure many will draw conclusions the current market will crash because the last time the VIX was this low we saw the market lose more than 50% of its value. At its current price, the S&P 500 has a PE of 21.41 (trailing twelve month earnings). If the index were cut in half we would still have a PE of more than 10 assuming earnings remain constant. This guessing game is leaving us with a headache. Focus on what matters: price and risk management.
We did not see a tremendous start to the week, but there isn’t much we can do otherwise. Focus on what is important and ignore the Wall Street noise. Keep grinding and cut those losses quickly.
